Navigating the Trump Administration’s Pause on IIJA and IRA Funding: Key Implications for Infrastructure Stakeholders

As the United States government transitions from the Biden Administration to the Trump Administration, significant changes are already impacting infrastructure policy, with likely consequences to both planned and in-progress infrastructure projects around the country. Disruptions in funding and other policy changes are creating uncertainty for investors and stakeholders involved in infrastructure projects, particularly the potential impacts on projects funded under the Infrastructure Investment and Jobs Act and the Inflation Reduction Act of 2022, as previewed in our January 18^thclient alert, “Implications of Incoming Administration Changes to Infrastructure Initiatives.”

The Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA)

The IIJA, also known as Public Law 117-58, was enacted for the stated purpose of addressing the nation’s critical infrastructure needs.[1] It allocates substantial funding to improve and modernize infrastructure across the United States and to promote investment in various sectors, including transportation, energy, broadband, and water systems.

• Transportation Infrastructure: The IIJA provides significant funding for roads, bridges, public transit, rail, and airports. These investments aim to repair and rebuild the nation’s infrastructure, enhance safety, and reduce congestion.
• Energy Infrastructure: The Act includes enhancements to the power grid, clean energy projects, and electric vehicle charging stations. These investments are designed to improve the resilience of the power grid, promote clean energy, and support the transition to electric vehicles.
• Broadband Expansion: The IIJA dedicates significant resources to provide high-speed internet access to underserved and rural areas. This investment aims to ensure that every American has access to reliable and affordable broadband, which are deemed essential for education, healthcare, and economic development.
• Water Systems: The Act allocates substantial funding to upgrade drinking water and wastewater systems. This includes investments for lead pipe replacement and to address PFAS contamination. These investments are identified as crucial for protecting public health and ensuring access to clean water.

The IRA is another significant piece of legislation signed into law by former President Biden on August 16, 2022.[2] The stated goals of the IRA are to address inflation, reduce the federal deficit, invest in domestic energy production and manufacturing, and promote clean energy. While some of the key components of the IRA address tax reforms and prescription drug pricing reforms, a significant portion of the Act addresses climate and energy investments. For example, the IRA allocates substantial funding for clean energy projects, including tax credits for renewable energy production, electric vehicles, and energy-efficient home improvements.[3] It also includes funding for the development of domestic supply chains for critical minerals and other components necessary for clean energy technologies.

While the IIJA largely focuses on traditional infrastructure projects, the IRA focuses heavily on clean energy and climate-related projects, including renewable and clean energy projects, electric vehicles, and other projects aimed at reducing carbon emissions, including carbon capture and storage technologies.

Trump Administration’s Executive Order on “Unleashing American Energy”

On January 20, 2025, President Trump issued an Executive Order titled “Unleashing American Energy,” which outlines the Administration’s policy goals and directives for energy and infrastructure development, and which also directs an immediate pause of funding allocated to infrastructure projects under the IIJA and IRA.[4]

Among other things, Section of the Executive Order states that Trump Administration’s policy objectives include increasing energy exploration and production on federal lands and waters, establishing the U.S. as a leader in non-fuel mineral production, and ensuring an “abundant supply of reliable energy” for economic and national security, promoting consumer choice in vehicles and appliances, and regulatory barriers to consumer choice in vehicles that the Executive Order likens to an “electric vehicle (EV) mandate.”[5]

Section 7 of the Executive Order directs all agencies to “immediately pause the disbursement of funds appropriated through the [IRA and IIJA]” during a 90-day review of the “processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds” for consistency with the law and policies established under Section 2. The Executive Order states that the pause will include but is “not limited to funds for electric vehicle charging stations made available through the National Electric Vehicle Infrastructure Formula Program and the Charging and Fueling Infrastructure Discretionary Grant Program.”[6]

While the disbursements are paused, agencies are instructed to conduct a review of the use of funds and provide recommendations. Specifically, agencies are required to submit reports within 90 days detailing their review findings and recommendations to enhance alignment with the Administration’s policy objectives outlined in Section 2 of the Executive Order. No funds will be disbursed until the recommendations are reviewed and approved by the Director of the National Economic Council (NEC) and the Office of Management and Budget (OMB).

The Office of Management and Budget subsequently issued a Memorandum to the Heads of Departments and Agencies on January 21, 2025, stating that the “pause only applies to funds supporting programs, projects, or activities that may be implicated by the policy established in Section 2 of the order. ... For the purposes of implementing section 7 of the Order, funds supporting the ‘Green New Deal’ refer to any appropriations for objectives that contravene the policies established in section 2.”[7]

Implications for the Paused Funding of Projects Under the IIJA and IRA

The Executive Order’s directive to pause disbursements and review funding processes has significant implications for the implementation of the IIJA and IRA. Whether the pause is temporary or becomes permanent, this action potentially could halt billions of dollars in obligated funding for infrastructure projects that already are underway, including those already under construction.

The scope of the January 20, 2025, Executive Order itself also is unclear as to whether it is limited to certain types of infrastructure expressly identified in the Order or more broadly to all projects funded under the laws. OMB’s memo seems intended to clarify that the pause in disbursements is only required for projects that implicate the policy goals in Section 2 of the Executive Order.  While OMB’s statement suggests that the Executive Order will only impact funding of what it calls “Green New Deal” projects, neither OMB nor the Executive Order clearly define the characteristics of such projects, leaving open to interpretation whether infrastructure projects for roads and bridges, broadband, and other traditional infrastructure could be impacted, at least in part. As such, even with OMB’s clarifying memo, uncertainty remains as to what is next for those IRA and IIJA programs not specifically listed in Section 2 of the Executive Order.

Any disruption in funding could have immediate effects on grant and loan recipients and their contractors, suppliers, and other consultants engaged on infrastructure projects funded by the IIJA and IRA. Disruptions in cash flow to these projects will create uncertainty and raise several potential impacts, including:

• Project Delays and Cancellations: The pause on funding disbursements—even if only for roughly 90 days—could lead to additional project costs, delays and potentially even cancellations of ongoing infrastructure projects that require continuous capital flow. The uncertainty for stakeholders could lead to legal challenges from states, municipalities, and private entities relying on obligated funds.
• Continuing Payment Obligations Despite Funding Pause: Depending on their agreement terms, downstream contractors and suppliers may assert entitlement to continued payments notwithstanding any disruption of funding to owners and prime contractors, which may give rise to subcontractor claims and/or create potential financial pressure on primes and owners. Owners and prime contractors will likely also face claims of continuing payment obligations to contractors or subs for work already performed.
• Legal and Contractual Issues: The government may issue stop-work orders while the government determines how to move forward amid the direction in the Executive Order. After the stop work period is complete, the government may be required to either resume performance under the contract or grant, or terminate the contract or grant either for convenience or default (if warranted). Contract and grant holders may claim entitlement to recover reasonable and allowable costs resulting from the stop-work order. If the contract is terminated for convenience, contract and grant holders may also seek to recover termination for convenience costs. However, if disruptive impacts caused by the implementation of the Executive Order are considered a constructive change to the contract, contractors may have additional bases to assert claims.  Thus, contractors should carefully review notice requirements in their contracts in order to preserve their rights. 

Another legal issue raised by the Executive Order is impoundment. By directing federal agencies to pause the disbursement of funds that were appropriated under the IRA and IIJA and then clarifying, the next day, that this only applies to certain programs, the Administration could be setting up the process for impoundment, which occurs when Congress appropriates funds that the president decides not to spend. Under the Impoundment Control Act, presidents can only use the impoundment power through requests submitted to Congress concerning the funds they choose not to disburse. However, the Trump Administration has argued that the Impoundment Control Act is unconstitutional and that the president has the power to cancel congressionally authorized spending, including spending funding appropriated for grants and other financial assistance. During President Trump’s first term, the Administration attempted to use impoundment and has stated that the Impoundment Control Act limits funding to certain financial assistance and grant programs that may not align with the goals of this Administration. If the Trump Administration does attempt to impound funds, parties affected by the impoundment are likely to contest the Administration’s authority to do so in the courts, which will lead to further uncertainty for infrastructure projects impacted by the issue.

• Administrative and Procedural Challenges: The Executive Order imposes tight deadlines for agencies to review their processes and submit reports. This could strain agency resources and lead to rushed or incomplete reviews, potentially resulting in legal challenges regarding the adequacy and thoroughness of the reviews. The Order also does not specify requirements for public or stakeholder engagement during the review process, which could lead to legal challenges based on claims that the reviews and subsequent actions were conducted without adequate public input or transparency or based on claims of arbitrary and capricious decision-making.

The precise implications of the Executive Order may not be fully understood for months, and this uncertainty alone is likely to disrupt infrastructure projects and give rise to claims. Even once the review and recommendations prescribed by the Executive Order are complete, there no doubt will be winners and losers in the allocation of the infrastructure money, which may differ from the allocations that were anticipated when contracts on these infrastructure projects were formed and which could lead to further lawsuits and complications surrounding the disbursement of obligated funds.

Some lawmakers have already expressed concerns about the legality and practicality of the Executive Order’s directives.[8] The Order’s directives to pause and review funds appropriated by Congress—and potentially already obligated to specific projects—raises constitutional and contractual questions about whether the Executive Branch has the authority to unilaterally pause or redirect these funds. Legal challenges could argue that the Trump Administration is overstepping its authority by effectively nullifying or delaying the implementation of duly enacted legislation and in-progress contracts.

Parties and stakeholders in projects funded under the IIJA or IRA will be well-served to work closely with agency representatives, review their agreement contract terms, notify their contracting/grants officer of any delays or increased costs, and keep detailed records of correspondence with the agency representatives, disruptions, costs and any other impacts arising out of the Executive Order.